Canada needs renewed federal leadership to support our energy sector, given its importance to the entire economy.
And all provinces and territories must come together in this effort.
If not, Canada will continue to see the sector fall behind the United States and other larger powers. We will lose our traditional position as a strong market-based global energy power.
Despite the effects of the COVID-19 pandemic on global oil prices, Canada continues to be the largest energy partner to the United States, and yet we lag behind our southern neighbour in terms of achieving energy security for our domestic market.
Canada has the world’s third-largest reserve of oil and we’re the fifth-largest producer of natural gas. However, this isn’t relevant if governments squander that untapped wealth or sell it for sub-optimal prices. Canada has traditionally sold its crude oil to the U.S. at prices below what the broader international market paid.
Canada is falling behind the U.S. in terms of productive energy policy, losing much ground when it comes to oil and gas development. By policy design, the U.S. has gone from being Canada’s largest customer for crude oil and natural gas to its largest competitor.
In the U.S., the owner of the land owns the hydrocarbons underneath property. In Canada and most other jurisdictions, the government owns subsurface mineral rights. The U.S. also has a vast infrastructure network that can handle an expanding energy sector.
Prime Minister Justin Trudeau has assured us that critical pipeline projects will proceed but the actions of his government tell a different story.
The Liberal government introduced Bill C-48, which imposed a moratorium on oil tanker traffic on British Columbia’s northern coast. The bill killed any hopes for pipeline projects that sought to move Alberta’s land-locked crude oil to the Pacific coast through one port.
Then the government introduced Bill C-69, which was intended to streamline the assessment process for projects but ended up creating less clarity and more potential for legal mischief.
The federal government also gave a tepid response when Alberta and British Columbia began an inter-provincial war of words over certain pipeline projects. The government allowed Bill S-245, designed to assert federal authority over inter-provincial pipelines, to die at second reading in the House of Commons.
The government also didn’t intervene when the premier of Quebec said no pipeline would pass through his province.
One Financial Post columnist commented in 2015 that since 2010, the United States had built the equivalent of 10 Keystone XL pipelines. According to the U.S.-based Association of Oil Pipe Lines (AOPL), between 2009 and 2013, almost 13,000 km of oil transmission pipelines were built in the United States.
The U.S. has also relaxed offshore drilling regulations to ramp up production.
Particularly under President Donald Trump, there has been an explosion in natural gas development in the U.S. His administration opened up large tracts of federal lands to energy development and has been instrumental in the shale gas revolution that expanded oil and gas reserves in the U.S., leading the country toward energy independence.
The administration also changed regulations allowing for natural gas development through hydraulic fracturing (or fracking). The Department of the Interior also worked on allowing Native American communities to better utilize energy resources on tribal lands, to the benefit of those impoverished communities.
The United States has emerged as an energy superpower while Canada has become an energy laggard and investment has fled.
The Trump administration ramped up oil and gas exploration by changing royalty rates for oil and gas leases on federal lands, as well as changing water regulations for fracking on federal and tribal Indian lands. The Department of the Interior also accelerated the pace of offshore oil auctions and reduced royalty rates so more energy companies could enter the market.
Meanwhile, Quebec and some Maritime provinces imposed moratoriums on fracking activities, despite the existence of vast untapped natural gas reserves, especially in New Brunswick.
It wouldn’t hurt if the federal government encouraged provinces to accept some fracking.
While some of the energy explosion in the U.S. can be explained by better technologies and methods, much can be attributed to regulatory and policy changes, as well as transformational leadership.
While Canada was listening closely to environmental interests and adopting a weak federal response to energy development, the U.S. was busy adopting winning policies and asserting a lead federal role in pursuing energy development, for both economic and foreign policy reasons.
Canada need not adopt a Trump-style “Canada First” policy. Canadians in all regions value strong environmental regulation and wish to protect wildlife habitats. We already have global-best environmental rules and technologies.
Canada needs a much more balanced approach that recognizes our desire to remain an energy superpower, with made-in-Canada policies that respect both the environment and the new energy economy within a free market.
Joseph Quesnel is a research associate for the Frontier Centre for Public Policy.